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Alabama Tax Sale Redemption Rights
There are four different tax sale redemption periods in Alabama. At the time of the tax sale, the investor receives a Certificate, which entitles it to possession of the property. Three years after the tax sale, the investor may demand a tax deed. Before the tax deed, the person who did not pay his taxes is still technically the owner. Despite that, I always refer to the defaulting taxpayer as the "former owner" because it makes things easier.
1. The "administrative redemption period" continues for three years after the date of the tax sale. Redemption is accomplished through local county offices. The investor is allowed to keep all rents collected before redemption.
2. The "judicial redemption period" is called that for historic reasons. It does not require a lawsuit. If the investor has not taken possession of the property, then the former owner has three years, from the date the investor takes possession, to redeem. If nobody is in possession of the property, the law assumes the former owner is still in possession. For tax sale properties owned by the State, the law assumes the former owner is still in possession. If the investor takes possession on the earliest possible date--the date it receives the tax certificate, five days after the auction--then the administrative redemption period and the judicial redemption period will both burn off at the same time. If the administrative redemption period has expired, the judicial redemption is negotiated directly with the investor, or resolved by the courts. The investor is allowed to keep all rents collected before redemption.
3. The "defective tax sale redemption period" arises when the tax sale was void for some reason. The former owner can contest the tax sale, reclaim the property, and pay only the taxes and 12% redemption interest, but will not be required to pay for preservation improvements or insurance premiums. In order to defeat this type of redemption, the investor must adversely possess the property for three years, starting on or after the tax deed date. This is called the "short statute of limitations" if you want to research it further. The investor must disgorge all collected rents if the owner redeems.
4. The "lienholder redemption period" is for one year, and applies to all recorded liens as of the date of the tax sale. Mortgage lenders, judgment creditors, IRS--they all have redemption rights they can exercise in order to protect their liens. Their redemption rights are during the "administrative redemption period" or the "lienholder redemption period," whichever is longer. The investor must send certified mail, return receipt requested, notice to all lienholders regarding the tax sale. There is no requirement for WHEN the notice must be sent. On the date the notice is received by the lienholder, that starts the one-year lienholder redemption period. If the notice is not sent until ten years after the sale (as an example) then the lienholder's redemption rights start on that date. If a lienholder redeems under this rule, the investor is allowed to keep all rents collected before redemption.
@Bryan Hartlen, sorry for the delay in responding. I did not receive notifications for several weeks, and have been so busy I didn't realize that much time had passed. Thanks @Ebony King for bringing this to my attention.
Bryan, you are incorrect regarding the law. To address each of your points:
- We can immediately take possession (change locks, trash-out, maintain the yard, etc) ONLY IF THE PROPERTY IS LEGALLY ABANDONED, WHICH MEANS THE OWNER HAS EXPRESSED AN INTENTION OF NEVER AGAIN RETURNING. MOST PROPERTIES ARE VACANT AND NEGLECTED BUT NOT LEGALLY ABANDONED. IF NOT LEGALLY ABANDONED, YOU MUST FIRST GET AN EJECTMENT ORDER FROM THE COURT.
- - We can start the quiet title action immediately. Do we need to file for ejectment too?
- YOU CANNOT QUIET TITLE UNTIL JUDICIAL REDEMPTION RIGHTS BURN OFF THREE YEARS LATER. YOU CANNOT QUIET TITLE UNLESS YOU ARE IN PEACEABLE POSSESSION. SEE PRIOR ANSWER REGARDING POSSESSION.
- - If we start repairing (not improving) BEFORE the quiet title action has completed – any redemption would have to include the value (not cost) of our repairs and holding costs (finance, utilities, insurance, etc).
- IF YOU ARE IN LAWFUL POSSESSION AND IF THE PROPERTY CONTAINS A RESIDENTIAL STRUCTURE AND YOU MAKE PRESERVATION IMPROVEMENTS, THEN ANY REDEMPTION WILL HAVE TO INCLUDE THE INCREASED VALUE OF THE PROPERTY.
- - If we rent the property out BEFORE the quiet title action has completed any redemption:
- - would not require us to pay any rents collected prior to the redemption? IF YOU ARE IN LAWFUL POSSESSION YOU DO NOT HAVE TO TURN OVER RENTAL REVENUES TO THE REDEEMING PERSON
- - our tenants may have to vacate with 30 days notice? YES, SO YOU SHOULD INCLUDE A 30 DAY CANCELLATION CLAUSE IN YOUR LEASE IN CASE THE PROPERTY IS REDEEMED.
- - If we sell the property out BEFORE the quiet title action has completed – how would a redemption affect us? REDEMPTION WOULD AFFECT THE NEW OWNER, NOT YOU. TO PROTECT YOURSELF FROM CLAIMS OF FRAUD, THOUGH, MAKE SURE YOU DISCLOSE THE POSSIBILITY OF REDEMPTION AND HAVE THE NEW OWNER SIGN OFF.
@Denise Evans thank you for the corrections. sounds like filing for ejectment should always be the first step.
Then you have to wait 3 years, the judicial period, before you can start the quiet title action. No exceptions - even if the tax sale was more than 3 years earlier, or 6 years when you bought the deed?
@Bryan Hartlen, the law is currently in a gray area. We thought we'd have a Supreme Court decision clarifying, but they kicked it out on a procedural ground. Many think that if you take possession, especially via ejectment, before the tax deed date comes, then those judicial redemption rights never come into existence. That is because they were originally supposed to provide a remedy only if the investor waited until after the tax deed to eject, and the statute would let the taxpayer counterclaim and redeem. Over 100 years, the courts have morphed that into something more. Probably the 2009 amendments changed things back to the way they were supposed to be originally, but we don't have appellate guidance. By the same reasoning, even if the investor ejects after the tax deed date, if it gets the order it means the taxpayer did not counterclaim for redemption. Logically, the counterclaim being a compulsory counterclaim, and the one shot at fixing mistakes or surprises (because you didn't know about the tax sale, presumably) having passed, it is all over for the taxpayer. We are all waiting for a nice, clean, test case to get to the Supreme Court and get guidance,
@Denise Evans In reading your previous replies, I see that a trailer on a lot is personal property. Would the trailer become your property after eviction process? I am in the process of obtaining my first two tax certs from the State and one has a house that has tenants and one a trailer that is vacant. Secondly, I saw a reference someone made about a book you wrote on this subject. I would be very interested in buying a copy, but not sure where to find it. Would appreciate where I am able to obtain your book. As I get deeper into the process with these two properties, I am sure you will see me again. Thanks in advance for your help!
@Karen Y Cole, an ejectment order requires the defendant to remove themselves and their possessions. I would think that if the trailer remains after that order, it is fair game as abandoned, but it's tricky and depends on how you word your ejectment complaint and what the ejectment order says. You should consult with a local attorney about that issue. My book is available on my new website at www.TaxSales-Alabama.com.
@Denise Evans Thank you very much for your quick reply! Hopefully last question for awhile. After I get the tax deed, on either property, is the first thing I need to do is send owner a notice to vacate? Should I go to talk to the one with a tenant and show them tax deed and let them know they can remain? And at what point would they pay me rent instead of "owner"? Will be getting your book soon, but do you have podcasts as well that may help with the process? Thanks for your help to us newbies! :)
@Karen Y Cole, with a tax deed it is not necessary to give a notice to vacate, but it is a good idea. You should send it to the owner, not to the tenant. If the owner does not respond within 30 days, then it is probably okay to approach the tenant about a new lease. That is true only with a tax deed, not a tax certificate. It is uncharted territory, meaning no statutory or appellate guidance on that particular topic, so proceed cautiously and stop and rethink everything if you get push-back.
@Denise Evans Thanks a bunch for the information! I really appreciate it!
@Denise Evans I found your tax site and send you an email through there. My questions were just to much for this thread.
Thank you!
@Denise Evans I have a tax certificate that sold to the state in 2019. The property has a large concrete block building on it with a roof that needs repairing. The door is locked and I do not know what is inside the building. No one is living in it. There is also an abandoned vehicle and junk that needs to be thrown away. The land needs the grass cut etc. I want to take possession and lease the building to my business. Can I change the locks? Repair the roof? Cut the grass? What about removing the junk? Any advice is appreciated.
Amanda Carrillo
@Amanda Carrillo, it's a lengthy explanation. Please search for my other blog posts and forum answers and I also have a youtube video that addresses this. Short answer--you probably have to give written notice to surrender possession, wait six months and then file an ejectment lawsuit before taking possession. There are work arounds, but you have to be very careful about doing them.
I bought tax deed from someone I know that buys and sells property, for sum of $4,000.00 for property that the taxes were not paid since 2015. If the owner wants or tries to redeem since I filed a quit claim deed with the probate office. Does the owner have to pay me the $4,000.00 I paid for the deed? Plus any interest...
@Rodman Gomez, the owner pays taxes plus 12% per year interest. If that adds up to less than $4,000, then all he pays is that smaller number. He does not pay you the $4,000 you paid plus interest on your purchase price.
So you are telling me of the owner wants to redeem and since I paid $4,000 for the tax deed then I would be out the $4,000.00. I did not know that. I should of never paid the $4,000.00.
@Rodman Gomez, what was the initial amount (unpaid taxes) that the property was sold for at auction? If the person who bought the certificate/deed also paid the subsequent taxes, then the owner will have to pay that, too.
Every type of investment has its risks. It's really important to know the rules before you pay anything to anyone.
I currently have a tax lien on a Jefferson County property and received a "verification of allowable expenses by tax sale purchaser" from the owner who is trying to redeem the lien. I do not have any expenses and will sign the form with a 30 day expiration of my signature. Who do I send this signed form back to? The owner trying to redeem or Jefferson County tax office?
@Denise Evans Is there any more recent clarification by the courts on whether the administrative and judicial periods can run simultaneously? If it seems there are many attorneys on each side of the discussion (yes, consecutively vs. no, meaning 6 years total), what is happening with the current efforts by investors to quiet title, if their argument is that both periods have elapsed within one 3-year period? This assumes the investor took open and uncontested possession - yard work, rented out the property, posted private property signs with contact info, etc.
If this kind of adverse possession can be documented and clear for the 3 year administrative period, is there no precedent to say that the same requirements for the judicial period have already been satisfied, regardless of whether it was during or after the administrative period?
@Ashley G. you seem to have a lot of good practical advice based on experience. What else would you say an investor can/should do to increase their odds of reaching their ultimate goal of a quieted, clear title? Like your advice on having documented contact with the taxpayer recorded with the redemption office - the details that make real differences in how judges are ruling on these things.
For the sake of relevance for myself, I’m asking about vacant land that could be argued to be abandoned or just vacant for years at a time. No structures, and no maintenance by owner. I’m just looking for the practical to-do list when it comes to crossing all t’s and dotting all i's, so when I bring my pile of documentation and evidence to a motion to quiet title, there won’t be anything to base an objection on. Thanks in advance!
Hi @Denise Evans,
One question:
"The "judicial redemption period" is called that for historic reasons. It does not require a lawsuit. If the investor has not taken possession of the property, then the former owner has three years, from the date the investor takes possession, to redeem."
...IF the INVESTOR has not taken possession of the property......
I bought a Tax Deed 1 year ago (it was over 10 years on the list), and I have had possession since then, do the taxpayer (former owner) have the right of redeeming the property, after I got the Tax deed and I have possession?
Yes, the former owner might still have redemption rights. It's very fact-specific.
Quote from @Justin Smoker:
@Ashley G. you seem to have a lot of good practical advice based on experience. What else would you say an investor can/should do to increase their odds of reaching their ultimate goal of a quieted, clear title? Like your advice on having documented contact with the taxpayer recorded with the redemption office - the details that make real differences in how judges are ruling on these things.
For the sake of relevance for myself, I’m asking about vacant land that could be argued to be abandoned or just vacant for years at a time. No structures, and no maintenance by owner. I’m just looking for the practical to-do list when it comes to crossing all t’s and dotting all i's, so when I bring my pile of documentation and evidence to a motion to quiet title, there won’t be anything to base an objection on. Thanks in advance!
I just saw this. It's not legally abandoned unless the owner plans not to return again. I do cover strategies with clients please message me
This has been a very helpful thread!! I have a two part question:
a little backround: we bought a state owned cert. and have since received a tax deed on it. upon getting the cert we went to the property and found a gutted (for renovation apparently) structure which was subsequently lost by the taxpayer. We cleaned out and secured the structure with plans to perform full repairs upon getting title. We have paid the city of Mobile for city performed vegetation abatement as well as our own landscapers over three plus years. We also trimmed several trees that were affecting not only "our" house but also a neighbor's as well. We have learned after all these preservation measures that the structure is below the new flood level and needs to be raise up or razed to the ground and it was stripped from the tax bill. my part 1: Are we entitled to include those expenses in the redemption demand to the lender who is apparently looking at foreclosure/redemption?
Part 2: We forgot the need to alert the lender via certified mail as to the sale and went through an attorney to file for quiet title action. The lender has responded to the court and is contesting the action which is fine by us. Our question is if we can include the fees for this action (and clearing an IRS lien) in the redemption figure?
Thank you in advance!
Way too complicated for my poor fingers to type an answer. Please feel free to contact me.
Hi Denise. I've just come across this post. When purchasing a tax deed that's more than 5 years old through the Best Price Offer process does the redemptioner pay the BPO purchase amount or the full amount of delinquent taxes. If they have to pay the full delinquent amount who do they pay it too? Thanks